Purpose This study aims to investigate how governance disclosure regimes, particularly comply-or-explain mechanisms, affect investor confidence across African capital markets. Focusing on South Africa, Nigeria and Egypt, it examines whether high-quality governance disclosures enhance firm valuation, improve liquidity and constrain opportunistic behaviors like tunneling, while accounting for institutional differences in enforcement and investor sophistication. Design/methodology/approach The study employs a multi-method research design combining event study methodology, panel regressions, difference-in-differences models and instrumental variable (two-stage least squares) approaches. The dataset includes 6,520 firm-year observations between 2015 and 2024, covering governance disclosures, financial performance, foreign ownership and market data. Governance disclosures are manually coded as substantive or boilerplate based on content analysis. Robustness checks, entropy balancing and heterogeneity analyses by sector, ownership structure and jurisdiction are incorporated to strengthen causal inference. Findings High-quality governance disclosures significantly enhance firm valuation (Tobin’s Q) and reduce liquidity costs (bid-ask spreads), particularly in markets with strong regulatory enforcement, such as South Africa. Firms use governance disclosures strategically, linking them to market expansion, cost reduction and innovation rather than compliance or Environmental, Social, and Governance goals. Foreign institutional ownership strengthens the monitoring effect, while investor reactions vary depending on market maturity and governance credibility. Originality/value This study refines governance and agency theories by empirically illustrating that the effectiveness of disclosure-based regimes in emerging markets depends heavily on institutional quality, investor activism and enforcement strength. It offers insights into the strategic framing of governance disclosures in African firms. It highlights the contextual boundaries of comply-or-explain models, providing actionable guidance for policymakers and scholars focusing on emerging economies.
Suleman Bawa (2026) studied this question.